Nir Eyal is an entrepreneur, educator, and author of the Wall Street Journal bestseller Hooked: How to Build Habit-Forming Products. A contributing writer to Forbes, TechCrunch, and Psychology Today, Nir’s work explores the intersection of habits, technology and better business practices. He recently joined Dan Olsen, author of The Lean Product Playbook, for a Heleo Conversation on how companies big and small can learn to innovate better.
This conversation has been edited and condensed. To view the full conversation, click the video below.
Nir: Tell me, what are we doing wrong with innovation? How should we be doing innovation correctly?
Dan: Lean Startup has taken the world by storm. I used to say, “Who’s heard of Lean Startup?” when I would give a talk and a few hands would go up. Now, everyone pretty much knows about it. They’re familiar with the high level concepts, they’re really motivated, and then when they go back to their teams or companies and they actually try to do it, they run into challenges.
The analogy I use is: it’s like when January 1st comes around and you decide “I’m going to get in shape” and join a gym. You buy some workout clothes and show up at the gym—you have no idea what to do. It’s not because you’re not motivated, it’s not because you don’t understand the high level concepts, you just don’t understand the details. That’s why I wrote a playbook.
Nir: [For those] not familiar with Lean Startup methodologies, what did Lean Startup change in people’s mindset that got us to this point?
Dan: It’s about getting explicit about your hypotheses, instead of just having these assumptions in your head. Talking about them, writing them down, and then figuring out what are the riskiest ones, and how can we come up with cheap, inexpensive ways to test those and see if we’re right or not. That’s part of it. Getting out of the building and talking to your customers. When I put that slide up, everyone in the audience nods. Then when I say, “Well, you may have tried doing it and run into challenges,” everybody keeps nodding, because it’s hard to do.
Nir: Right, we’ve been talking for over ten years now about how this is a better way to make products and services—we should do rapid iteration, customer development, we should be talking to our customers more, doing more than just focus groups, doing build, measure, learn methodologies… but why does it fall flat? Why is it so hard to implement?
“You don’t want to say, ‘Hey, I have this idea,’ have a team of 10 developers go off for six months, code it, launch it, and then realize nobody else thinks that.”
Dan: A big part of it is “problem space” versus “solution space.” It’s human tendency, and it is so easy, to just say, “Hey, let’s build a product that’s going to help people share photos,” and to start coding it. Or to start designing it. And say, “I think it should look like this,” right?
When you do that, you jump straight into solution space, and you have not gotten clear on who is this for, what are the real customer needs, and how is our product going to meet those needs in a way that is better or different? That is what the problem space is all about. It happens all the time. In a team meeting, someone will say, “We need a wizard that does x.” Or maybe you are in B2B and some client says, “We need you to build us this.” Then, you go off and build it. You launch it, then it turns out, they are not happy with it, it does not meet their needs.
The problem space is messy. If we talked to 20 users and said, “Hey, what’s important to you in sharing photos?” they would each use different words. They wouldn’t be computers spitting out the same string to us. They would be talking at different levels of specificity.
Nir: Are you saying we should always start in the problem space?
Dan: I think it is helpful to be clear what benefits there are. The reality is, if someone is using an existing solution, you can go talk to them and see what they like and don’t like about it. Watching people interact with existing solutions can give you ideas about opportunities that you might address. It’s about coming up with hypotheses, “I think these are pain points,” and then going out and talking to people to validate if that is the case or not.
Eventually, you will need solutions to show them so that you can get proper feedback, because you can’t have these esoteric discussions with people. If I go, “Wouldn’t you like an app that makes it easy to share photos?” you’re going to say, “Sure.” And in your head, you may be envisioning a certain UI, and in my mind, what I’m envisioning… I guarantee they are not the same.
Nir: The way these things tend to happen is that a great idea pops into somebody’s mind, so they start in solution-land already. I don’t know if you can change that, right? Inspiration comes from a vision. When should we pull back? When should we say, “Actually, wait a minute. Before we dive too far along…”
Dan: Before you invest too many resources. The whole point is to not be wasteful. “Lean” comes from lean manufacturing, from the quality movement, which I studied before I moved out to Silicon Valley. It is all about eliminating waste. You don’t want to say, “Hey, I have this idea,” have a team of 10 developers go off for six months, code it, launch it, and then realize nobody else thinks that. And it happens all the time.
“It’s not enough to say, ‘I got clear on the customer benefit,’ you also need to get clear on why it is going to be better than what’s out there today.”
Have the breakthrough innovation idea, great, but then use five whys technique. Why would someone care about this? What’s it going to do for them? And, most importantly, what’s your value proposition? Why is this going to be a better photo sharing app than the other ones that are out there? It’s not enough to say, “I got clear on the customer benefit,” you also need to get clear on why it is going to be better than what’s out there today.
I use the analogy of peeling an onion. I was talking to a startup the other day, and going through my pyramid to explain product market fit. People talk about it matter-of-factly: “Vox succeeded because they had product market fit.” Not super helpful. But the bottom of the pyramid starts with the target customer—whose life you are trying to make easier? “Who’s your target customer?” And they’re like, “Millennials.” Off hand, that sounds like a good answer, but then you scratch your head and think about it. There’s a lot of millennials. They are not a homogeneous group.
Nir: A lot of different problems.
Dan: That’s the challenge. You start out with some high-level benefit statement: “We are going to make people’s taxes easier.” But my advice is to peel the onion as you learn and talk to people and form more detailed hypotheses. Get down to the thing that’s like, “We are not just going to help them do a better job on their taxes, we are going to help them maximize their deductions.” That’s a very specific benefit. There are ways to get really granular. It’s funny, because you can get situations where the team’s building a feature, and you try to map it back… and it’s an orphan. It doesn’t map to any of the problems. You’re like, “Why are we building this again?”
Nir: Why are big companies so bad at this? Big companies try to invest in startups, they try to have incubators, and by and large, it doesn’t work. Why is that?
Dan: There’s a few reasons. A lot of times you end up with stakeholders that have opinions about things, and they can shape the context and requirements. There can be a lot of time and energy spent on stakeholder management, which doesn’t directly translate to innovation or customer value.
The other thing, too, is some companies forget what it was like to be a startup. Every company was a startup. And now they’ve got these big business units, and are like, “Every product we make is 100 million or more in annual revenue.” An analogy is like burning fires. You have these big fires generating 100 million in heat, or revenue. We forgot how to get a little fire going and tend it and kindle it. They are like, “Oh my gosh, you have been at it for 9 months and you are only making 200K a year?” There’s no patience for the ramp-up curve and seeing what the future potential could be.
Nir: Is corporate innovation an oxymoron? Is it impossible?
Dan: I don’t think so. The interesting thing is what motivates a company to start going down this path is usually fear. It’s, “We are going to get disrupted, we can see this coming.”
Nir: So they see it?
Dan: Or they are worried about it. That’s frankly the best motivator. The other way is you have some leadership team or CEO who says, “You know what? I feel like we’re not innovating as much as we used to. The products we’re launching are not getting the receptiveness that we thought we were going to get.” It can be either one of those that motivates someone to do it, but there are definitely companies that make it work.
The AgTech companies have created incubators for startups, like a seeding ground for them. That’s another way companies can stay in touch with the latest innovation, by keeping, promoting, and fostering these ecosystems and staying close to those people.
“Nobody goes out for low importance needs on purpose. They think it’s high importance, but because they don’t validate their hypotheses, they work on it, launch it, then realize, ‘Oh, we thought this was important, but the customers don’t.’”
Nir: What are some ways of thinking about product design that [people] can carry forward?
Dan: Building on problem space/solution space, the next thing is, say, if you do create a detailed definition of the problem space, then you are going to have to prioritize which ones you should go after, which ones create the most customer value. Earlier in my career, I created a framework called importance versus satisfaction. The idea is, for each of these needs, we can ask people, “How important is this to you?” And then, “How satisfied are you with how you are getting that need met today?”
Basically, it ends up being a 2 x 2—the low importance stuff doesn’t really matter. Nobody goes out for low importance needs on purpose. They think it’s high importance, but because they don’t validate their hypotheses, they work on it, launch it, then realize, “Oh, we thought this was important, but the customers don’t.”
Nir: And how do you ascertain that?
Dan: You can ask people with a survey. The other way to use it is as a thinking tool as you are forming your hypotheses. I often use Airbnb as an example. We talk about all the benefits, about how they can be better than hotels, and then we have people rate, “How important do you think that is for the customer?”
Nir: Do you generally see one overwhelmingly important feature that you try to focus the product around? Or do they tend to clump together?
Dan: Some clump together, but it gets multidimensional and complex. It all starts with the target customer, right? And what happens in Airbnb, one of the trick questions is to just jump into customer needs. People start listing them. Some teams realize that there is a renter and a landlord and some teams don’t. There’s two different users and a lot of times there is a buyer versus a user or a two-sided market. You need to think through the benefits for both of those people.
And the 18-year-old backpacker is very different than the business traveler as far as what is important and how satisfied they are with what is out there.